IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

What drives urban consumption in mainland china? The role of property price dynamics

  • Chen, Yu-Fu
  • Funke, Michael
  • Mehrotra, Aaron

This paper adds to the literature on wealth effects on consumption by disentangling house price effects on consumption for mainland China. In a stochastic modelling framework, the riskiness, rate of increase and persistence of house price movements have different implications for the consumption/housing ratio. We exploit the geographical variation in property prices by using a quarterly city-level panel dataset for the period 1998Q1 – 2009Q4 and rely on a panel error correction model. Overall, the results suggest a significant long run impact of property prices on consumption. They also broadly confirm the predictions from the theoretical model.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2011-50.

in new window

Date of creation: 2011
Date of revision:
Handle: RePEc:edn:sirdps:283
Contact details of provider: Postal: 31 Buccleuch Place, EH8 9JT, Edinburgh
Phone: +44(0)1316508361
Fax: +44(0)1316504514
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Martin Lettau & Sydney C. Ludvigson, 2004. "Understanding Trend and Cycle in Asset Values: Reevaluating the Wealth Effect on Consumption," American Economic Review, American Economic Association, vol. 94(1), pages 276-299, March.
  2. Case, Karl E. & Quigley, John M. & Shiller, Robert J., 2001. "Comparing Wealth Effects: The Stock Market versus The Housing Market," Department of Economics, Working Paper Series qt44k6g6vx, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  3. Joanne Cutler, 2004. "The Relationship between Consumption, Income and Wealth in Hong Kong," Macroeconomics 0403013, EconWPA.
  4. Monika Piazzesi & Martin Schneider & Selale Tuzel, 2004. "Housing, Consumption and Asset Pricing," 2004 Meeting Papers 357c, Society for Economic Dynamics.
  5. Slacalek, Jiri, 2009. "What Drives Personal Consumption? The Role of Housing and Financial Wealth," Working Paper Series 1117, European Central Bank.
  6. Jie Gan, 2010. "Housing Wealth and Consumption Growth: Evidence from a Large Panel of Households," Review of Financial Studies, Society for Financial Studies, vol. 23(6), pages 2229-2267, June.
  7. Andreas Lehnert, 2004. "Housing, consumption, and credit constraints," Finance and Economics Discussion Series 2004-63, Board of Governors of the Federal Reserve System (U.S.).
  8. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  9. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  10. Hiebert, Paul & Roma, Moreno, 2010. "Relative house price dynamics across euro area and US cities: convergence or divergence?," Working Paper Series 1206, European Central Bank.
  11. Chen, Yu-Fu & Funke, Michael & Mehrotra, Aaron, 2011. "What drives urban consumption in mainland china? The role of property price dynamics," SIRE Discussion Papers 2011-50, Scottish Institute for Research in Economics (SIRE).
  12. Bostic, Raphael & Gabriel, Stuart & Painter, Gary, 2009. "Housing wealth, financial wealth, and consumption: New evidence from micro data," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 79-89, January.
  13. Marcos Chamon & Eswar Prasad, 2008. "Why are Saving Rates of Urban Households in China Rising?," IMF Working Papers 08/145, International Monetary Fund.
  14. Carroll, Christopher D. & Otsuka, Misuzu & Slacalek, Jiri, 2010. "How large are housing and financial wealth effects? A new approach," Working Paper Series 1283, European Central Bank.
  15. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
  16. Skinner, Jonathan, 1989. "Housing wealth and aggregate saving," Regional Science and Urban Economics, Elsevier, vol. 19(2), pages 305-324, May.
  17. LokSang Ho & Gary Wong, 2008. "Nexus Between Housing And The Macro Economy: The Hong Kong Case," Pacific Economic Review, Wiley Blackwell, vol. 13(2), pages 223-239, 05.
  18. Pesaran, M.H. & Smith, R., 1992. "Estimating Long-Run Relationships From Dynamic Heterogeneous Panels," Cambridge Working Papers in Economics 9215, Faculty of Economics, University of Cambridge.
  19. Jing Wu & Joseph Gyourko & Yongheng Deng, 2010. "Evaluating Conditions in Major Chinese Housing Markets," NBER Working Papers 16189, National Bureau of Economic Research, Inc.
  20. Koivu, Tuuli, 2010. "Monetary policy, asset prices and consumption in China," BOFIT Discussion Papers 18/2010, Bank of Finland, Institute for Economies in Transition.
  21. Marjorie Flavin & Shinobu Nakagawa, 2008. "A Model of Housing in the Presence of Adjustment Costs: A Structural Interpretation of Habit Persistence," American Economic Review, American Economic Association, vol. 98(1), pages 474-95, March.
  22. Koivu, Tuuli, 2010. "Monetary policy, asset prices and consumption in China," Working Paper Series 1240, European Central Bank.
  23. Joanne Cutler, 2004. "The Relationship between Consumption, Income and Wealth in Hong Kong," Working Papers 012004, Hong Kong Institute for Monetary Research.
  24. John D. Benjamin & Peter Chinloy & G. Donald Jud, 2004. "Real Estate Versus Financial Wealth in Consumption," The Journal of Real Estate Finance and Economics, Springer, vol. 29(3), pages 341-354, November.
  25. Ashvin Ahuja & Lillian Cheung & Gaofeng Han & Nathan Porter & Wenlang Zhang, 2010. "Are House Prices Rising Too Fast in China?," IMF Working Papers 10/274, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:edn:sirdps:283. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gina Reddie)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.